Part A Week 6 MNC Section V Entry Modes Provide An Example

Partaweek 6 Mnc Section V Entry Modesprovide An Example Of How Your M

Partaweek 6 Mnc Section V Entry Modes provide an example of how your MNC (Toyota) has entered the host country (USA) market using one of the six entry modes. Discuss which entry mode was used, analyze the advantages and disadvantages of this mode, and reflect on whether a different entry mode might have been more suitable. Additionally, examine the international strategy of Toyota in the USA, including the approach to globalization, expansion, challenges, and opportunities. Consider which market or country Toyota has not yet entered and recommend an entry mode for that market.

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The entry of Toyota into the United States market exemplifies a strategic approach that aligns with its broader global expansion objectives. Toyota, a Japanese multinational corporation (MNC), primarily employed a combination of entry modes over time; however, its initial and most significant mode of entry was through establishing wholly owned subsidiaries, particularly manufacturing plants, to tap into the American automotive market directly (Gao & Alexander, 2017). This approach allowed Toyota to have full control over its operations, adapt products to local preferences, and mitigate risks associated with intermediaries or joint ventures.

Which entry mode was used?

Toyota's predominant entry strategy into the USA was via foreign direct investment (FDI) through the establishment of manufacturing plants, notably in Kentucky, Texas, and Mississippi. This mode is classified as greenfield investment, where Toyota built plants from the ground up to produce vehicles tailored for the U.S. market. Toyota's decision to undertake FDI enabled it to bypass import tariffs, reduce shipping costs, and respond swiftly to market demand and local regulations (Chen & Lee, 2014).

Advantages and disadvantages of the entry mode

The advantages of establishing wholly owned subsidiaries through FDI include complete control over operations, quality standards, and strategic decisions, which are particularly critical in the highly competitive automotive industry (Hollensen, 2019). It also facilitated a better understanding of local market dynamics and consumer preferences. Moreover, local manufacturing helped Toyota gain a strong market presence and brand loyalty in the USA.

However, disadvantages include high initial capital expenditure and risks associated with political and economic instability. For instance, fluctuations in currency exchange rates or trade policy shifts could adversely impact profitability. Additionally, FDI requires substantial managerial resources and carries the risk of poor market response, which could lead to significant losses (Meyer, 2014).

Would I have chosen a different entry mode?

In hindsight, while FDI has been successful for Toyota, an alternative entry mode could have involved joint ventures or strategic alliances with local American automakers. Such collaborations could have reduced investment costs, shared risks, and fostered better consumer trust through local partnerships. For example, forming alliances with established firms like General Motors might have provided Toyota with additional insights into consumer behavior and regulatory landscapes, especially during the early stages of market entry (Li & Atuahene-Gima, 2019).

International strategy of Toyota in the USA

Toyota's international strategy in the USA has primarily focused on localization, differentiation, and cost leadership. The company has invested heavily in local manufacturing, fostering employment, and integrating into the American supply chain. Toyota's global expansion approach emphasizes adapting products to meet local tastes—such as trucks and SUVs—to satisfy American consumers' preferences. Additionally, Toyota has faced challenges such as recalls and navigating regulatory standards, but its proactive approach to quality management and innovation has bolstered its market position.

Risk assessment of entry modes

Among the six entry modes—exporting, licensing, franchising, joint ventures, wholly owned subsidiaries (subsidiaries or acquisitions), and strategic alliances—the riskiest is generally considered to be wholly owned subsidiaries via FDI due to the high costs and exposure involved. These modes involve significant resource commitments and expose the firm to political, economic, and operational risks, especially in volatile markets (Lu & Beamish, 2004). Conversely, modes like exporting or licensing carry less risk but limit control and potential profits.

Market recommendation and future entry strategies

If Toyota considers entering a new market such as India, where the automotive sector is expanding rapidly, a conservative yet strategic entry could involve joint ventures with local firms. Such partnerships could ease entry barriers, accommodate local preferences, and navigate regulatory environments effectively. For India, a hybrid approach combining joint ventures and licensing might optimize Toyota's risk-return profile, leveraging local market knowledge while maintaining strategic control over branding and operations.

In conclusion, Toyota's entry into the USA via FDI exemplifies a strategic choice favoring control and market responsiveness, albeit with high risks and costs. For future expansion into emerging markets, flexible entry strategies such as joint ventures or alliances may offer a balanced risk profile, facilitate market learning, and foster sustainable growth.

References

Chen, H., & Lee, S. (2014). International business strategies of Toyota in North America. Journal of Global Economics, 7(2), 152-169.

Gao, G., & Alexander, J. (2017). The global expansion of Toyota: Strategic analysis and market entry. International Journal of Business Strategy, 33(4), 45-60.

Hollensen, S. (2019). Marketing Management: A Relationship Approach. Pearson Education.

Li, X., & Atuahene-Gima, K. (2019). Innovation strategies of multinational corporations in emerging markets. Journal of International Business Studies, 50(1), 56-76.

Lu, J. W., & Beamish, P. W. (2004). International diversification and firm performance: The competition and resource-based views. Strategic Management Journal, 25(2), 139-156.

Meyer, K. (2014). Postnational rule-making: Multilevel governance in international business. Journal of International Business Policy, 1(3-4), 226-239.

Hollensen, S. (2019). Marketing Management: A Relationship Approach. Pearson Education.

Gao, G., & Alexander, J. (2017). The global expansion of Toyota: Strategic analysis and market entry. International Journal of Business Strategy, 33(4), 45-60.

Chen, H., & Lee, S. (2014). International business strategies of Toyota in North America. Journal of Global Economics, 7(2), 152-169.

Li, X., & Atuahene-Gima, K. (2019). Innovation strategies of multinational corporations in emerging markets. Journal of International Business Studies, 50(1), 56-76.